HP Launches Ultra Thin Laptops Soon After Regaining PC Sales Crown

Hewlett-Packard (NYSE:HPQ) regained the top spot in worldwide client PC market in Q1 2012 after losing briefly to Apple (NASDAQ: APPL) in Q4 2011. Apple became the top seller of client PCs mainly due to record iPad shipments in excess of 15 million units. Apple shipped 11.8 million iPads in Q1 2012, making its total client PC sales to 15.8 million. [1] HP’s shipments were marginally higher by about 40,000 units according to Canalys estimates. The total client PC market grew by 21 percent to 107 million units. [2]

HP announced the new Envy Ultrabooks and Sleekbooks which are aggressively priced and start at US $599. This is much lower than the Dell XPS 13 that starts at $999. Ultrabooks are the new thin and light laptops backed by Intel which use its low voltage processors. The Intel backed thin laptops cost a premium and can be in the range of $800 to $1,000.

It also designed the Envy Sleekbooks, a thin laptop that runs on AMD chips and costs a fraction at $500 which is likely to drive early adoption. It failed to make an impact in the tablet market with the TouchPad and may revisit this with its own version of a Windows 8 tablet. Canalys claims that tablets are approaching 40 percent of all client PC shipments and without a tablet, it is unlikely that HP will retain its top spot.

The PC business is highly competitive and margins are low. We estimate that the current margins for HP in the notebook and netbooks business is in the range of 9 percent and this is unlikely to change. With innovations such as the Ultrabook and Sleekbooks, we can expect higher margins as customers will be willing to pay more for enhanced performance, compact design and improved power efficiency. With prices significantly lower than MacBook Air, we can expect Ultrabooks to attract users who want a thin notebook but are also price sensitive.

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